Driving Mitigation Wedges with a Carbon Tax

I frequent a few online discussions on climate change and I see a lot of disagreement on what can and should be done to mitigate climate change. These arguments generally go something like:

Wind can't do it because the wind doesn't always blow.

Solar can't do it because it's dark at night.

Nuclear could do it, but it is too dangerous.

Conservation isn't enough.

And so on...

There are partial truths to each of the objections, and it is probably true that none of these can solve the problem by themselves. What some people fail to consider is that these are not mutually exclusive strategies. It will require a combination of strategies to sustain our way of life while weaning us off our fossil fuel dependency.

The necessity of leveraging more than one mitigation strategy is not a new thought. Nearly a decade ago two researchers, Pacala and Socolow, wrote an influential paper that outlined 15 strategies that could be used to reduce the increase in atmospheric CO2 content. In time, some combination of these will bring the increase to zero and stabilize the climate. (This paper has been cited by nearly 1,800 other research papers; in case you are not familiar with citation rates in general, that is a very large number.) The main idea was that each of these strategies could reduce the increase a little bit, effectively wedging it down a notch at a time.

Increase ethanol production 12 times by creating biomass plantations with area equal to 1/6th of world cropland.

Eliminate tropical deforestation.

Adopt conservation tillage in all agricultural soils worldwide.

The good news is that in 2004, we only needed about half of these to achieve what we thought was considered a reasonably safe goal, and every one of them is possible with existing technology. The bad news is that we have taken half measures on less than half of these, and it is looking like a 2C increase is less safe than we once thought. Now we need more than 8 wedges; I've seen estimates on what is required from 12 to 21 wedges. (Yes, if the correct answer is 21, we have to invent some more wedges, or double down on several of them.)

Which wedges should we drive forward; which will give us the most return on our investment over the coming decades? Honestly, I do not know. However, I'm fairly certain that the free market is pretty good at finding the most cost-effective solutions. The market is driven by costs; so, if you want to move the market, you have to shift its cost structure. Changing the way we produce energy will be somewhat disruptive. There will be start-ups that fail, and technologies that don't live up to their initial promise, but the more effective solutions will grow and thrive.

Currently the fossil fuel industry enjoys the benefit of not suffering any of the costs of the changing climate they are causing. Burning all the reserves these companies have on record will push the temperature far past the level agreed to be the upper limit of safe by a consensus of nations, including ours. Continuing under a business-as-usual plan will bring an end to business as usual. We could try to stop this from happening through regulation or government subsidies, but people and corporations have a history of finding ways to avoid the intent of regulations, and I don't trust our politicians with your money, much less mine. It would be simpler and more conducive to transparency to tax fossil fuels at the source or entry port until producing energy with them is more expensive than the alternatives.

Having said that, I do not know anybody who thinks it it a good idea to try to make this change overnight. We have to balance the need to avoid economic collapse with the need to avoid environmental collapse. Either will be very bad for us.

A commitment to gradually phase in a carbon tax would encourage investors and inventors to develop 13 of the 15 wedges. That would be one piece of legislation instead of a hodge-podge of regulations. I do not think that limiting deforestation and improving agricultural sequestration would be directly affected by a simple carbon tax, but maybe something in the legislation could help with that. A carbon tax would not commit us to any particular set of wedges to use, and it would not put the government in a position to pick the winners (and losers). It would create a cost structure where at least part of the damages resulting from dumping CO2 into the air would be borne by those most responsible for the increase.

There are legitimate concerns about how a tax on carbon is implemented. It is likely that you are not the first person to think of whatever concern you have; so, I recommend you look over the information at the following sites.

Comments

Than k you for your thoughtful piece. Might be interesting if you priced a number of your wedges that would satisfy the need to reverse climate change as you define it.

Your carbon tax comment provides no specificity as to implementation. The issue is implementation. We could use a carbon tax to fund my recommended national program so that the money collected actually addressed our worst problems.

Other wise my comments on the other letter stand ie.: the known program is not revenue neutral as it punitively transfers money from carbon heavy users to others (under the best of circumstance if Congress does not rip off some of the revenue). It is not market based as the heaviest contributors to our carbon problems are our utilities which are almost all government controlled. Most importantly it does nothing to reduce carbon generation. Individual rate payers would still have to pay to fix the problem - after paying the tax that goes to others.

This is a national program requiring a national solution that is not punitive toward a small segment of our population.

I'm not giving prices on wedges because that depends a lot on changing technologies, and I am not advocating any particular wedge or set of wedges. However, sure, let's look at one; I like wind as one of the emerging winners.http://emp.lbl.gov/publications/recent-developments-levelized-cost-energy-us-wind-power-projects
Wind appears to be achieving some economies of scale, and at high wind sites, is running as low as $33/MWh (3.3 cents/kWh). Kansas has a large portion of the best wind sites, but we need transmission lines.

Carbon tax implementation. There are a couple of proposals at Carbon Tax Center, including one where the government keeps the money and uses it to fund other things. The problem I see with that is that, if it works, revenues will decline over time, and the decline might not fit the schedule of whatever the money is being used to fund. And, I still don't trust the government to pick winners and losers in the technology sector. I like the proposal by the Citizens Climate Lobby, which returns the tax collected as a monthly rebate spread evenly across the population. There's a FAQ and actual legislation proposed at the link I provided.

The CCL proposal works out to 15 cents per gallon of gas at the start, and then ramps up over time.

It is not about punishment. It is about the recognition that we have all come down this path together, and figuring out the most effective way to get on a different path.

It would reduce carbon generation. Natural gas being cheaper than coal is the reason many utilities are converting coal plants to gas. Gas has carbon, but far less than coal in terms of carbon per BTU. Energy drives the cost of everything; goods manufactured in more efficient ways cost less than their equivalents. Last time I checked, cost was a deciding factor in most people's buying choices. Given two cars that are pretty much the same, and one gets more MPG than the other, most people would choose the one that gets better mileage. Making carbon based fuel more expensive just accentuates the choices people already make.

A tax and dividend implementation would leverage people's natural buying choices throughout the marketplace, and protect low-income folks from increased costs. Because the higher cost of fossil fuels would be passed on to the consumer, it would create more incentive for energy producers and manufactures alike to switch to more effecient or less carbon intensive ways of making whatever it is they make.

It is regrettable that no one has attempted to price the actions necessary to stop and/or reverse the consequences of climate change. Just looking at your wedges list it is IMHO going to be very dear to take the necessary actions – perhaps amounting to 5 to 10 trillion dollars in various cost accounts.

I note that your version of a carbon tax is exactly the version I have critiqued. We need to move away from punishment and toward remediation – paid for by all as the goal is a national goal. Punishing the few is despicable. Misrepresenting the nature of your solution is – well dishonest.

Now I have heard the rebuttal as to the cost of not reversing climate change. The point that seems to be missed is that we are talking a major inter generational cost shift. A significant majority of those alive today will be little affected by climate change. But these are the folks you are asking to accept the reduction in standard of living. It is not surprising that your call is not resonating.

We live in a society that is running a trillion dollar a year deficit the will be passed on to our kids. Apparently we have little regard for them or we would curb our appetite for current goodies – however noble they may seem.

That is why I offer a national program where we ask a little of a lot of people and not a lot of a few. We have rallied in the past to address national interests. We respond poorly to efforts to selectively punish.

"This program is not revenue neutral as it punitively transfers money from carbon heavy users to others"
First, I'm pretty sure that it has been pointed out to you before that the revenue neutral aspect refers to the government getting control of the money collected. Second, yes, it is a tax; can you name a tax that does not transfer of money? Apparently you have a problem with a system where those more responsible for the damages pay more for the mitigation; I don't.

"It is not market based as the heaviest contributors to our carbon problems are our utilities which are almost all government controlled."
Why are coal plants being converted to gas? That is a market decision. The operators of the coal plants decided that gas was going to cost them less. I've already explained that people's everyday choices on what to buy would be influenced by higher costs for CO2 producing energy. It doesn't get more market based than that.

"It is regrettable that no one has attempted to price the actions necessary to stop and/or reverse the consequences of climate change. "
I've already shown that wind, for instance, can be cost competitive with coal (barring things like Brownback making some of our prime wind area inaccessible to energy companies - which he has done). So, I'd like you to show some evidence regarding what you think the costs of mitigation will be.

"A significant majority of those alive today will be little affected by climate change."
I don't know how you say that. Re-insurance companies are seeing an increase in natural disasters, http://www.munichre.com/en/group/focus/climate_change/research/default.aspx
You can also look at the reports from Swiss Re.
The incidence of heat waves like the one we had in 2012 is more than 10 times higher than it was prior to recent decades. We lost $11 billion in agricultural damages alone last year. In general the incidence of extreme weather events is on the rise already.

"But these are the folks you are asking to accept the reduction in standard of living. "
Looking at the Department of energy estimates, the very worst alternative energy production technology costs about 1.5 times what coal costs. Fossil fuel energy companies represent about 7% of the GDP; so, the upper limit of increased energy costs is about 3% of GDP. There was a study out of KSU recently that yields per acre of Kansas wheat suffer about 20% loss per degree of warming. How much loss do you think we should take before trying to mitigate the damages.

This idea of punishment is only in your head.

You have already agreed that your system would put the government in a position to decide where the tax revenue should be spent. That is just more tax and spend. Why don't you try convincing people that is a good idea and see where it goes?

Why ARGUE Chris - you have agreed with my central point - it is punitive.

I have never argued that we should not spend money to address climate change - I advocated for a more equitable solution. We in KANSAS are not culpable for the fact that we use coal.

I never argued that a market based solution would not work (except for areas like utilities that happen to be major contributors to climate change). The market is already working to a significant degree. I argued that taxing me to punish me for using carbon in my utilities is not a market solution. The government (which controls almost all utilities) is already making decision that raise the cost of energy (which raises the costs of just about everything else) in order to use more renewables. WE have CAFÉ, we have energy efficiency, we have regulatory mandates). Exactly what are we missing? What does your tax do other than make it more expensive for people who are already trying to fix the problem while staying within their means?

Since the market is already addressing climate change (through government action and regulation and through individual choices resulting from energy (and other) costs increasing as a result why do we need to add your tax into the solution pot?

But then you know all of this and are deliberately avoiding the central issue because the only reason you want that tax is to redistribute income and force more money into the remediation effort without any particularly justification other than “Rome is burning”.
You price the costs of your wedges. You proposed them. Brownback has nothing to do with it = just another ADVOCATE red herring. The issue is national. My point is that you want more and more resources without any definition of the end point and the cost to get there.

In a democratic nation it behooves the advocate to explain what they wish to achieve. All you seem to want to do is scare people into giving you and other advocates a lot of money to spend as you see fit.

How much and how fast? Why do we need a tax that only redistributes income when we are already spending money (wish I could find a source as to how much) to fix the problem??

I did a quick web search and found a source (unverified) that suggests that there is direct federal government investment of about $10 Billion per year. But that is chump change compared to estimates from EPA regulatory sources (unverified) that suggest that we are spending about $1.7 trillion dollars a year and climbing in the economy to address climate change.

That is a lot of money. How much more do you want per year? I guess when you have no idea as to how much you need you just demand more and more until you get to wherever you ultimately decide is the end point.??

Talk about a "trust me" card. Wow!!! And this comes from the academic community that gave us the unnecessary mass inoculation for swine flu in my younger days.